A financial ombudsman today warned that increasing numbers of people were being mis-sold travel insurance because companies were failing to explain what was not covered by the policy.

The Financial Ombudsman Service expressed "concern" over the way in which policies were sold, with sales staff rarely taking the time to discuss with customers what cover they needed.

Complaints about travel insurance have seen a big increase during the past 12 months and now account for around one in eight of all disputes between consumers and insurers, compared to one in 10 last year.

Tony Boorman, principle ombudsman in insurance, criticised companies' compliance with the General Insurance Standards Council code, which puts the onus on the insurer to explain the small print to consumers.

It was "haphazard at best", he said.

"Our experience is that not enough is done by the industry to explain these policies and to correct many of the misconceptions about their scope."

He said one of the main problems was a general expectation that travel policies covered almost every loss which occurred while on holiday, when in practice most policies had strict limitations.

In a report published today the Financial Ombudsman Service said although many insurers gave customers a "cooling-off period" during which they may cancel the policy and get a full refund if they decided it is unsuitable, it was unreasonable to expect people to understand a complex insurance contract without guidance.

Mr Boorman said: "With 10 or more different types of cover being provided, travel policies are far from straight forward.

"Indeed for many customers, travel insurance is perhaps the most complex financial product they purchase during the year."

Where travel insurance was sold separately people were usually more influenced by the price than the cover that was offered.

The group found that one of the main causes of disputes was over claims for cancelled holidays due to pre-existing medical conditions.

It said it often received complaints from people who thought only conditions that had been diagnosed by a doctor were excluded from cover, when the standard exclusion is for all medical conditions, whether or not the policyholder's doctor has identified them.

The group also called on insurers to make it clearer to consumers that extra cover may be needed for hazardous sports, which can include scuba diving, mountain climbing or even driving a motorbike.

Mr Boorman said: "Travel policies do not offer redress against all the things that may go wrong during a holiday.

"If the industry made this clear when marketing these policies and improved both the clarity and simplicity of policies and the information available at the point of sale about what is and is not covered, then the disappointment so often expressed by consumers might well be avoided."